Bush Distances Himself from Aide on Exporting Jobs

Reuters ^ | February 12, 2004 | Adam Entous

[Deliberator]

HARRISBURG, Pa. (Reuters) - Under pressure from fellow Republicans, President Bush distanced himself on Thursday from one of his top economic advisers who said the outsourcing of U.S. jobs to workers overseas may benefit the economy.

"The (economic) numbers are good. But I don't worry about numbers, I worry about people," Bush told students and teachers at a high school in Pennsylvania -- a pivotal state in this year's election and one of the hardest hit by factory job losses during his presidency.

Without mentioning by name the chairman of his Council of Economic Advisers, Gregory Mankiw, Bush said he was concerned "there are people looking for work because jobs have gone overseas" and vowed to "act to make sure there are more jobs at home" by keeping taxes low and by retraining displaced workers. Bush offered no new initiatives to curb outsourcing and aides said he opposed restrictions on free trade.

With political concern about unemployment heating up ahead of the November presidential election, critics have seized on Mankiw's characterization of "outsourcing" by U.S. companies as "something that we should realize is probably a plus for the economy in the long run."

Democrats said his comments and the council's annual report were evidence that the Bush White House is insensitive to the plight of out-of-work Americans.

Senate Democratic leader Tom Daschle predicted Mankiw would quit.

But Democratic Sen. Hillary Rodham Clinton of New York said, "This is the economic report of the president and not the economic report of Mr. Mankiw ... We cannot allow our Republican friends to shift the blame and the burden to Mr. Mankiw."

Senate Democrats said they would propose new protections for workers whose employers send their jobs overseas. Their proposal would require that outsourcing companies disclose their plans to their employees and to the Labor Department.

On Wednesday House Speaker Dennis Hastert of Illinois joined the bipartisan chorus of criticism from the U.S. Congress and the campaign trail, saying of Mankiw: "His theory fails a basic test of real economics."

The White House has rebuffed any suggestion that Mankiw resign. "That's kind of laughable," spokesman Scott McClellan said, adding: "Our economic team is doing a great job."

U.S. Commerce Secretary Don Evans defended the comments, telling CNBC: "What he praised was free trade and open trade. Every president since Herbert Hoover (1929-33) has said that free and open trade - as long as it's fair trade - is good for our economy."

At issue is the practice of a growing number of U.S. companies to move all or a portion of their operations to places like Mexico, India and China, where labor costs are lower and goods can be produced more cheaply, in order to improve corporate profits.

Nearly 2.8 million factory jobs have been lost since Bush took office and the issue looms large ahead of November's vote, where victory in rust-belt states like Pennsylvania could be key.

Underscoring its political importance to Bush's re-election, Thursday's visit was his 25th to Pennsylvania as president. He narrowly lost the state in the 2000 election, and analysts say he may have hurt his chances of winning it this year when he scrapped U.S. tariffs on steel imports in December to avert a trade war with Europe.

© Reuters 2004. All Rights Reserved.

[neutrino]

Goodness! There you go, bringing facts into the discussion! Next thing, you'll start pointing out that India has a long history of NOT being a friend of the US - and hence, just might hold our financial interests and information hostage to their own agenda.

But what the hey, lower prices trump all other arguments.

[OXENinFLA]

H Clinton want a "sense of the Senate concerning the outsourcing of American jobs"

This woman is EVIL.

[brownsfan]

What happened? The U.S. overtook G.B. in wealth, and economic power. There are complex reasons for this, but are tariffs a factor? It's a fact that it happened.
The fact that the U.S. population, resource base, transportation infrastructure, etc. far exceeded anything that Great Britain had to offer was the major cause of this, not the tariffs. In fact, if you look at Great Britain compared to the rest of the world in these areas I mentioned, it's a wonder they managed to remain an economic power for as long as they did.

I think that's too dismissive. I did allow for that by saying the reasons are complex. However, in the 1970s when Japan was kicking our collective butts economically, and they are still competitive, how do you explain that? To use your words with a twist: The fact that the U.S. population, resource base, transportation infrastructure, etc. far exceeded anything that Japan had to offer...

[Alberta's Child]

What's interesting about her response is that the whole "outsourcing" question this country faces today hasn't really been as big an issue in New York as it has been in other places.

The state of New York has such a terrible business climate that most of the jobs that are being "outsourced" from the U.S. had left New York years -- or even decades -- ago. New York City may be the first place in the nation that has actually developed beyond the point where it can even be called a "service economy" anymore.

[steve50]

Try starting a business Mr. President without the overbearing threats from ADA (your daddy's other baby), EPA (Nixon's baby), IRS, OSHA to name only a few of YOUR federal bureaucracies standing in the way of "free trade".

I was trying to run a small business when these things hit full stride in the late 60's/ early 70's. They were always more about making it next to impossible for a small business operator to survive than protecting anything.

[Deliberator]

does that mean most Americans are wrong?

Yes.

[brownsfan]

Something that everyone needs to keep in mind here is that the United States is facing the same basic dilemma that every modern society has faced -- and every developing nation will face, too. The dilemma is that there will always be a trade-off between our standard of living and our ability to compete in a global marketplace --

I agree. In fact, I would agree that some offshore outsourcing is good for not only America, but everyone. I agree that competitive pressure in a global marketplace is good. Look at what the Japanese did for Detroit. Without that pressure, they'd still be making horrible automobiles.
My point, and I'd guess the point of many here, is that there has to be some control. To wholesale offshore outsource isn't good for us. In the cases presented here, China and India, the workers are abused by our standards. I think government has a role in leveling the playing field until those countries "catch up" in living standard. And they will, eventually. I would agree that there has to be some pressure here as well. And yes, a contraction in the standard of living may be a by product. But there is a difference between contraction of standard of living, and simply displacing jobs. We've managed to render unions nearly irrelevant. The environment for business here could be made friendlier, but it's not all on the back of the worker. You can't expect workers here to move a family of 5 into a 2 room shanty because that is the China/India model.

[Alberta's Child]

However, in the 1970s when Japan was kicking our collective butts economically, and they are still competitive, how do you explain that?

You just answered your own question. The notion that Japan was "kicking our collective butts economically" is one of the great myths of recent U.S. history. Certain Japanese companies (really only manufacturers) may have been "kicking butt" compared to their U.S. competitors, but even at its height in the late 1980s Japan as a nation always had a standard of living that was quite modest compared to the U.S.

Japan's ability to "kick butt" in these areas was a function of two things: 1) a currency that was always kept weak in comparison to the U.S. dollar (hence, their ability to offer lower labor costs was accompanied -- by definition -- by a lower standard of living); and 2) the same U.S. transportation infrastructure that I mentioned in my last post (due to rapid changes in the global shipping industry, it was no more expensive -- and maybe even less expensive -- to ship an automobile to New York from Japan than it was to ship it to New York from Detroit).

Item #1 is particularly noteworthy because Japan's labor cost advantage disappeared once their currency strengthened against the U.S. dollar. As a result, the Japanese can no longer compete with their new manufacturing competitors (China, Malaysia, Indonesia, etc.) when it comes to exporting goods to the U.S. But they still "kick butt" in the one area (auto manufacturing) where -- get this -- they now manufacture a large number of their products right here in the United States!

[oceanview]

evil sure, but also VERY smart. while Rove is twiddling his thumbs. Hand this issue to the Dems, and its over.

[DoctorMichael]

"....(who have nothing to actually ofer in teh way of solutions mind you)...."

I agree! They will use this subject as a club.....and if elected will either do nothing, or make the situation worse by some new government program or handout.

[brownsfan]

does that mean most Americans are wrong?

Yes.

One person, one vote. I said it before. So, if most of us are wrong, then you'll have to live with the consequences.

If everyone around you seems to be crazy, don't worry, they are, you're ok!

[Alberta's Child]

You can't expect workers here to move a family of 5 into a 2 room shanty because that is the China/India model.

It's interesting that you should mention that -- because that was pretty much the "U.S. model" back in the "good old days" at the height of the industrial revolution when the U.S. had no problem with "outsourcing."

[OXENinFLA]

but also VERY smart.

Yeah, in a Power hungry "I'm going to take over the world" Pinky and the Brain kinda way.

[lewislynn]

It would appeal to the free market component here, but would surely sink his reelection campagin if he were that honest.

Just being honest isn't good enough, you also have to be right...His (honest)want for the arificial injection of "guest workers" isn't exactly a "free market" idea that will get him re-elected either...and it isn't right for the government to interfere in/manipulate the American labor market.

He would be more honest and correct if he addressed (with sincerity) the fact that OUR government (not just wages) is the reason for the flight of jobs/industries...If he honestly doesn't believe know that, then he's not worthy of re-election as a Republican...in my opinion.

[brownsfan]

It's interesting that you should mention that -- because that was pretty much the "U.S. model" back in the "good old days" at the height of the industrial revolution when the U.S. had no problem with "outsourcing."

So, am I to infer that you think that should be the U.S. model?

[uncbob]

Rove and Bush BETTER get all their people together in ONE room and come up with a DECENT postion on ALL issues

This is getting PATHETIC

[Alberta's Child]

I have no idea what the "U.S. model" should be. I'm simply pointing out that there is going to be a price to pay for whatever we decided the "U.S. model" is going to be.

Some people may think the U.S. model should be a 30-room mansion on a five-acre parcel of land for every family in the United States. That's fine -- but if they think this country could function that way with people living that kind of lifestyle while working as steelworkers, assembly line workers, waiters, etc. (or even doctors, accountants, engineers, and software developers), then they are living in a dream world.

[Deliberator]

if most of us are wrong, then you'll have to live with the consequences.

Nothing new there---I lived with 8 years of Klintoon. (And Gore got more votes than Bush.)

[oceanview]

they manufacture a large number of their cars in the US to avoid a trade war. obviously they could manufacture those cars in Mexico or other parts of Asia at far lower labor costs. The US has already demonstrated it would use tariffs to protect the US car market, we have a 25% tariff on light trucks. The Japanese were smart, they avoided a trade war and produced cars for this market with our labor at selling prices that Americans were willing to pay, and they still profit, so its a win-win.

If tomorrow, there was a mass exodos of US buyers from Japanese cars to Kia, Suzuki, Hyundai, etc, the entire situation would change in a moment. If the Koreans were able to produce $12K cars that Americans perceived as equivalent to $20K cars built in the US, we would either have to tariff Korean cars, or watch the entire US manufacturing base for autos (from both domestic and foriegn manufacturers) dissappear.

Its the same reason why we don't make DVD players in the US. The consumer perceives the $39 DVD player from China as equivalent to a $300 US made DVD player (hypothetically, if one existed), so at that point, the purchase is made solely based on cost. The same is happening with the furniture industry, Chinese made furniture is perceived as being identical to North Carolina made furniture, so guess what is happening to the NC furniture industry. If that happens with autos, either we tariff auto imports, or we lose the industry.

[Alberta's Child]

That may be the case, but there are at least two major Japanese auto manufacturers (Honda and Toyota, I think) that have set a corporate policy of manufacturing their vehicles in the country in which they are sold.

What most people may not realize is that these foreign manufacturers started opening plants here in the U.S. for two major reasons beyond the tariff issue you mentioned: 1) They could operate plants here in the U.S. and still under-sell U.S. manufacturers through superior management and by using non-union workers (often former UAW members!); and 2) deregulation and consolidation in the U.S. railroad industry since 1980 has dramatically reduced the cost of shipping cars inside the U.S.

I believe the second point was one of the major factors that prompted both Mercedes-Benz and BMW to open plants in the United States in the early 1990s.